Arbitrum One batches users' transactions and submits them to Ethereum, paying a share of the transaction fees to Ethereum validators (expense).

Arbitrum One is an L2 smart contract platform for decentralized applications on Ethereum. Arbitrum was founded by Offchain Labs and launched in 2021.

ARB tokenholders own and govern the protocol. They currently run the only sequencer and take a cut of the total transaction fees paid by users (revenue). Arbitrum’s investors include Polychain, Alameda Research, Coinbase Ventures, etc.

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Arbitrum One

# Arbitrum One Expenses Methodology

## 1. Overview

Expenses is defined as the total cost incurred by Arbitrum One to operate its network. This metric is comprised of the cost of revenue, which is represented by the L1 settlement fees paid to Ethereum for batch posting and data availability, and token incentives. Token incentives are currently set to zero, meaning total expenses are driven entirely by the gas costs associated with settling transactions on Ethereum. This metric is utilized to evaluate the operational efficiency and profitability of the Layer 2 network.

## 2. Data sources

- **Blockchain events**: Transactions initiated by sequencer addresses, covering Ethereum
- **External data**: End-of-day price feeds for ETH

## 3. Step-by-step calculation

### Component A: L1 settlement cost tracking

- **Purpose**: The gas costs incurred by Arbitrum sequencers to post transaction batches and state updates to Ethereum are captured.
- **Logic**: Transactions on Ethereum are filtered to identify those sent from designated Arbitrum sequencer addresses. For each transaction, the gas fees are calculated by multiplying the gas used by the effective gas price, and adding the product of blob gas used and blob gas price where applicable. The resulting amounts are normalized by decimal precision to represent the total ETH spent on L1 settlement.
- **Key fields**: `gas_price`, `blob_gas_price`, `gas_used_amount`, `blob_gas_used_amount`

### Component B: Token incentives tracking

- **Purpose**: The value of token incentives distributed by the protocol is tracked.
- **Logic**: Token incentives for Arbitrum One are set to a constant value of zero.
- **Key fields**: None

### Component C: USD conversion and aggregation

- **Purpose**: Settlement costs are normalized to USD and daily expenses are aggregated.
- **Logic**: The daily L1 settlement costs in ETH are multiplied by the end-of-day price of ETH to convert the values to USD. These cost of revenue figures are then combined with the zero-valued token incentives to calculate the total daily expenses. Daily granularity is maintained using UTC day boundaries.
- **Key fields**: `cost_of_revenue`, `token_incentives`, `expenses`

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Total project operating and incentive expenses.

Arbitrum OneARB

Expenses

Expenses

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